Kazakhs plan $1B in Eurobonds to help plug budget gap

Kazakhstan plans to issue $1 billion of sovereign Eurobonds by end-June to finance the 2013 national budget deficit, Finance Minister Bolat Zhamishev said on Tuesday.

Zhamishev told a cabinet meeting now is probably the best moment to make the move because international interest rates are at record lows.

The government reckons that 150 billion tenge ($996 million) of bonds will help plug the fiscal gap and establish a benchmark for Kazakh firms that aim to raise cash later this year.

The bonds will have a five-year maturity term.

“Taking into account low interest rates [abroad] and the country’s stable macroeconomic situation, we consider it possible to launch sovereign Eurobonds in the first half of 2013 to finance the budget deficit and set a benchmark for Kazakh issuers,” the Reuters news agency quoted Zhamishev as saying.

The Eurobond issue will raise Kazakhstan’s sovereign debt to $5.8 billion, or a shade under one-quarter of the government’s total borrowings.

Kazakhstan’s budgetary gap was estimated to be $6.5 billion in late 2012, with an increase of an additional $1.35 billion to $7.85 billion, or 3.1 percent of gross domestic product (GDP).

Zhamishev said international rates are at a historic low due to Europe’s debt woes coupled with fears of a second wave of the global financial crisis. He said Kazakhstan should take the opportunity to borrow cheaply on foreign markets by offering the bonds that will be attractive to investors who are interested in stable economies.

Fitch ratings agency has given Kazakhstan a BBB+ long-term foreign currency issuer rating with a stable outlook, indicating the country is a good bet for investors.

Central Asia’s largest economy is powering along with growth in gross domestic product of 5 percent, with a mainstay of support from its massive hydrocarbons industry whose output is mainly sold abroad.

The country last issued Eurobonds between 1996 and 2000 and managed to pay them off in 2007, just ahead of the global financial crunch. Astana has fluctuated over issuing Eurobonds in recent years, scrapping plans in 2010 for a launch in favor of Islamic bond sale.

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Charles van der Leeuw, writer, news analyst, was born in The Hague, The Netherlands, in 1952. He started working as an independent reporter on cultural issues in a wide variety of publications back in 1977. Ten years later, he settled down in war-torn Beirut as an international war correspondent, following a first experience in Iraq in 1985, which resulted in his first book on the Iraq-Iran war. After his kidnapping and release in 1989, his second book “Lebanon – the injured innocence” came out, followed, in early 1992, by “Kuwait burns”. Later in the year, he settled down in Baku, Azerbaijan, as a war correspondent. “Storm over the Caucasus” on the southern Caucasus geopolitical conflicts came out in 1997 in the Dutch language and two years later in the first English edition. It was followed by “Azerbaijan – a quest for identity” and “Oil and gas in the Caucasus and Caspian – a history”, both published in 2000, and “Black & Blue” published in Almaty in summer 2003 about the stormy rise of Russia’s present-day oil and gas companies.
In 2012, he published a bipartite book about the histories of Kazakhstan and Kyrgyzstan. His latest publication before this work was “Cold War II: cries in the desert – or how to counterbalance NATO’s propaganda from Ukraine to Central Asia”, published by Herfordshire Press, England, along with books similar to this one on Kyrgyzstan, published in English, French and German editions.